7 Ecommerce Pricing Strategies Every Seller Should Know

7 Types of Ecommerce Pricing Strategy · 1. Cost-Based Pricing · 2. Competitor Based Pricing · 3. Value (Consumer) Based Pricing · 4. Dynamic Pricing · 5. Bundle ... All Popular Amazon BuyBox eBay Feedback GoogleShopping News Repricing Shopify Walmart InAmazon,Popular,Repricing7minread Sellingonlineisbigbusiness,butwithsomany‘entry-level’ecommerceoptionssuchaseBay,AmazonandShopify,itcanalsobeahighlycompetitivearena. Whileitwouldbefantasticifpricewasn’toneofthemostsignificantdrivingfactorsinsales,andconsumersmadetheirpurchasingdecisionsbasedonlyonthequality,featuresandbenefitsofyourproduct,yourcustomerserviceandeaseofordering,unfortunately,mostoftenthisisn’tthecase. Inparticular,fortheecommerceentrepreneur,successorfailurecanalltoooftencomedowntoproductprice.Inthisworldof‘throw-away’productsandcompetitioninprettymucheverynicheyoucanimagine,priceisamassivefactorforanybusiness.Butsettingyourproductpricesisnotaneasytask. It’sforthisreasonthatyoumusthaveanecommercepricingstrategy. WhatisPricingStrategy? Beforewelookatthedifferenttypesofecommercepricingstrategy,andthereareafew,let’sbeclearastowhatapricingstrategyactuallyis.Becauseit’snotaboutsimplychoosingapriceandthenretailingyourproductatthatprice. Apricingstrategywillhelpyoudeterminethepricewhichwillmaximizeyourprofitswhileremainingattractivetotheconsumer.Alogicalequationifyoulike,whichyouusetoestablishwhatisthebestpriceforyourproduct. Thethoughtofthismayseemacomplicatedandtime-consumingprocess,butyourecommercepricingstrategyiscrucial.Takingastabinthedarkandpluckingarandomfigurefromnowhere,basedonnothingisnotgoingtoassistyouwithyourrevenuegoals. Andwithoutapricingstrategy,thedangeristhatifyoupriceyourproductstoohigh,youwon’tachievesales.Butpricethemtoolow,andyouwon’tmakeanyprofit.So,asanecommercebusiness,youshouldmaketimetoconsiderthebestpricingstrategyforyouraudience. WhyDoYouNeedaPricingStrategy? Well,runninganecommercebusinesswithoutapricingstrategyinplaceisapoorbusinessdecision.Insimpleterms,yourpricingstrategyisanimmenselyimportantmarketingtacticwhichenablesyoutofindthatperfectmiddlegroundwhereyouareofferingvaluetoconsumers,butyouarealsooptimizingprofitandgrowingyourrevenue. Ifyouconsideryourownbuyinghabitsforamoment,you’llunderstandthatoneofthemostimportantwaysaconsumerchoosesbetweenproducts,istheprice.Itwouldbegreatifthiswasn’tthecase,butthere’snogettingawayfromit. Ofcourse,thisworksbothways–noteveryoneislookingforalowprice!Luxuryanddesignergoodsaretypicallypricedhigh,andconsumersexpectthis.Thesebusinessesknowwhattheycancharge;henceitisthemostcriticalfactorintheirprofitability. It’spreciselythesameforyou!Pricingisthebasisofyourbusiness.Knowingtheoptimumpriceyoucanchargeforyourproductwillensureyoumaximizesalesandkeepastepaheadofyourcompetition.Ultimately,gettingyourpricingrightisthebestwaytoimproveyoursalesconversions. FactorsThatAffectYourEcommercePricingStrategy Itdoesn’tmatterwhetheryourbusinessislargeorsmall,therearefactorsinvolvedwhichareindividualtoyourspecificpricingstrategy. 1.WhatAreYourCosts? Whendeterminingyourecommercepricingstrategy,you’llneedtotakeintoaccountproductionorproductcosts,labourcosts,shippingcosts,advertisingandmarketingcosts. Foryourproducttobeprofitableandyourecommercebusinesstogrow,youmustchargeanamountwhichcoversallyouroutgoingcostsandleavesyouwithaprofittoo.Asyourcompanygrows,therewill,ofcourse,beeconomiesofscalesobearthatinmind. 2.WhatisaFairPrice? It’salwaysgoingtobethecasethatifyouputtwoproductsthatareexactlythesameinfrontofaconsumer,theywillmostlychoosethelower-pricedproduct.Butthere’sadifferencebetweena‘fair’priceanda‘low’price. Lowpricesmakeyourproductsappearaffordableandmaywellencourageconsumerstochooseyourproductoveryourcompetitor.Still,fairpricescanbeachievedwhenyouensureyourproducthasthatlittleextrasomethingoveryourcompetitor’sproduct,makingyourproduct‘similarbutbetter.’That’swhyyoumustalwayshaveaUSP–butthat’sanotherstory! 3.WhatPriceisRelative? Whileyourpricingstrategywillbebasedonspecificfactors,youmustalsoevaluatethepricessetbyyourcompetitors.Researchtheirprices,theirofferingasawholeandanytangibleandintangibleextras.Onceyouhavethatinformation,youcanpositionyourpricesrelativetotheirs. Forexample,ifyousellscreensandyoursellingpointisthattheyareblackoutscreens,youcanchargemorethanyourcompetitorwhosellsnon-blackoutscreens.Inthesameway,ifyousellfauxleatherhandbags,youcanchargelessthanyourrealleathersellingcompetitors.It’sbasicrelativity. Sonowcomesthenitty-gritty–determiningyourpricingstrategy.Unfortunately,thereisnosimple,singleequationthatallowsyoutoquicklyworkoutyourbestpricebecauseultimately,itwilldependonwhattypeofpricingstrategyisbestforyourbusinessmodel. Forecommerce,therearesevenpricingcategoriesyoushouldconsider. Wantexpertonlinesellingtips?SubscribetooureCommercenewsletterSubscribe  7TypesofEcommercePricingStrategy 1.Cost-BasedPricing Thisisthemoststraightforwardpricingstrategy,butitisbusinessfocussedratherthancustomerfocussed.Inotherwords,thepriceisbasedontheprofityouwanttomake,ratherthanhowmuchacustomermightbewillingtopay.You’lllikelyneedtotweakthepricinguntilyoufindtheoptimumpricewiththisstrategy. Addtogetherthecostofyourproducts,includingshippingandmarketingandtheprofitmarginyouwouldliketoachieveandthatisyoursellingprice! Example: Product:$5 Shipping:$3 Marketing:$5 TotalCost:$13 RequiredProfitMargin:$5 YourSellingPrice:$18 Bestforecommercebeginners. 2.CompetitorBasedPricing Thisisanotherstraightforwardecommercepricingstrategy.Hereyou’llneedtospendtimeresearchingyourcompetitors’pricinghabits.Youshouldlookatallsimilarproductspricedhighandlowsothatyourresearchspansawholerange.Thentaketheaveragepricebasedonyourresearch.Becarefulnottopriceyourproductsbelowtheaveragepriceasthiscanprompta‘racetothebottom’betweensellers.Whenthishappens,therearenowinners! Subtractyourcostsfromtheresearchedaverageprice,andyou’llbeleftwithyourpotentialprofitmarginbasedonthataveragesellingprice. Example: AverageSellingPrice:$20 YourCosts:$13 YourPotentialProfit:$7 Bestforecommercebeginners. 3.Value(Consumer)BasedPricing Thispricingstrategyisamixofcost-basedandcompetitorbasedstrategies.Itisalwaysbasedaroundthevalueyouprovidetoyourcustomersthroughyourproducts,soit’salittlemorecomplicatedthanthepreviouspricingstrategies.Thispricingstrategymustbeafairpricebothforyouandyourcustomerforittobesuccessful,butitcanpromotecustomerloyalty.Itispotentiallythebestpricingstrategybutwilltakealittlemoreeffortandresearch. Buthowdoyoufigureout‘value’?That’sagoodquestion.Youmustworkoutwhatvalueyoucanbringforyourcustomer,withyourUSP. Workoutwhatisthelowestpriceyoucansellyourproductfor.Thentaketheaveragesellingpriceresearchedpreviously.Thedifference,aswecalculatedearlier,isyourpotentialprofit.NowyoumustdecidewhetheryouwillsellfortheaveragesellingpriceandtaketheprofitascalculatedoraddyourUSP(uniquesellingpoint)thusincreasingthevalueandthereforetakingtheopportunitytoincreaseyourprice–andyourprofit. Example: LowestSellingPrice:$13 AverageSellingPrice:$20 YourPotentialProfit:$7 AddValuewithaUSP NewValue-BasedSellingPrice:$22 NewValue-BasedPotentialProfit:$9 Bestforecommercebusinesseswithsomeexperienceoftestingpricingstrategies. 4.DynamicPricing Dynamicsimplymeansflexible.So,acertainamountofflexibilityonyourpricewillallowyoutosetoptimalpricesinresponsetodemandandcompetitionfluctuations. Example: Ifthecompetitionincreases,youcandropyourpricesothatyouarethecheapestseller.Ifyourcompetitorrunsoutofstockanddemandishigh,youcanraiseyourpricebecauseit’sasellers’market.Thisisatypical‘supplyanddemand’strategy. YouwillneedtokeepasharpeyeonyourcompetitorswhenyouchooseDynamicPricingandsousingrepricingsoftwarecouldbeadvantageous. Bestforecommercebusinesseswithtimeandresourcestokeepupwithresearchorbudgettospendonrepricersoftware. 5.BundlePricing TheBundlePricingstrategyisparticularlysuitableifyousellinahighlycompetitivenicheonathird-partyplatformsuchasAmazonoreBay. Theapproachitselfissupersimple,thecluebeinginthename!Youbundlearangeofcomplementaryproductstogethertoformakitorasetforadiscountedprice. Bybundlingproductsofasimilarnature,yougettheopportunitytoincreaseyouraverageordervaluebecauseyou’llbeofferingcustomerstheconvenienceofpurchasingallthethingstheyrequire,inonehandy,singletransaction. Example: Acustomerpurchasingapairofboxingglovesislikelytobealsolookingatwrapsandpads.Bundletheseproductstogethertoformaneasytopurchasesetofboxingequipmentandpriceatadiscountforthebundle. Bestforanyecommercebusinesssellingmultiplecomplementaryproducts. 6.LossLeaderPricing Youhaveprobablyseenthosereallycheapproductsonline,right?Theoneswhereyoustareopen-mouthedwonderinghowonearthanybusinesscanactuallybemakingaprofitontheproduct. Well,thechancesaretheyarenot.Becausetheyareloss-leaders.Theseareproductssoldatalowpriceasahooktosimplygetcustomerstoyourwebsiteorproductlistings.Thelossleaderpricingstrategyworksbecauseonceyouhavehookedthecustomerin,theyarelikelytobrowseyourotherproductsandpurchaseadditionalitems. Example: LossLeader:Ateethwhiteningkitpricedat$20andrefillspricedat$10each.Mostoftheprofitswillbemadeonreturningcustomerspurchasingtherefills. LossLeader:Aprinterpricedat$99andinkrefillscosting$49perset.Mostoftheprofitswillbemadeontheinkrefills. Inthecaseoftheprinter,thisisaone-offpurchase,soit’seasytoofferitatalossbecauseyouknowyouwillmakeupforthatlosswiththeprofitsfromtheinkrefills! Bestforecommercebusinessessellingproductsthathaveeasy‘add-ons’suchasrefillsorsomethingthatisrequiredasarepeatpurchase. 7.PriceSkimming Howmanytimeshaveyouseenan‘exclusiveoffer’onaproduct?Manytimes,Iguess.Andseeinganoffermakesyouwantitallthemore!It’stheexclusivityfactor.So,thisiswhatthepriceskimmingstrategyisbuiltupon–asenseofurgency.Youintroduceaproductatahighpricetoleveragethefactthatit’s‘newandexclusive’sothatyourprofitsaremaximizedimmediately. Example: “ExclusiveOffer” “LimitedStock” “LimitedAvailability” Byusingthesephrasesinyourproductmarketing,youbuildasenseofexcitementandcanhookbuyerswhohaveafearofmissingout. Bestforallecommercebusinesseswhowanttomaximizetheirprofitsfromtheget-go. FinalThoughts Thebestecommercepricingstrategyforyouwillalwayslargelydependonthenatureofyourbusinessandyourgoals. Youmustrememberthatpricingcancontinuouslychangesoyouwillneedtokeepontopofyourpricingstrategy.It’snotunusualfortheretobearequirementthatyourunseveralpricingstrategiessimultaneously. Befairandmakesureyouoffervaluetoyourcustomers.Theyaresmart,soyourpricingstrategymustalsobesmart. Repricer.comisthefastestAmazonrepriceronthemarketandaproudmemberofAmazon’sMarketplaceDeveloperCouncil.Tryrepricingfreefor14daysandincreaseyourprofitsonAmazon,eBay,Walmart,Shopifyandmore. ShareThisStory,ChooseYourPlatform! 10EssentialAmazonSellingTipstoGrowYourSales Dedicatedsolutiontohelponlineretailersgrowfaster,andsellmore! Repricer AutomaticallyrepriceonAmazontostaycompetitive24/7.WintheBuyBoxandmultiplyyourearnings.Learnmore…Free14daytrial Nocreditcardrequired AmazonRepricingSoftware:YourSecretWeaponforQ4Success InAmazon,Popular,Repricing7minread AmazonA10Algorithm:EverythingYouWantedtoKnow(2021) InAmazon,BuyBox,Repricing4minread 10EssentialAmazonSellingTipstoGrowYourSales InAmazon6minread WhatistheAmazonBuyBoxAlgorithm? InAmazon,BuyBox4minread 6AmazonRepricingMythsDebunked InAmazon,Popular,Repricing2minread WhatAretheTopFeaturestoLookforinanAmazonRepricer? 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